Sat, Feb 24, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

A. Ineichen: the real value of hedge funds is in active risk management, not alpha

Thursday, December 02, 2010

Benedicte Gravrand, Opalesque Europe:

"Is alpha quantifiable in the absolute return space?" asked Alexander Ineichen his audience during Terrapinn's Hedge 2010 conference in London last month. The short answer was "not really."

Alpha is not really more than just a marketing term, he said. The value that hedge funds really add, according to the Zug, Switzerland-based founder of Ineichen Research and Management, is active risk management.

Hedge funds indeed seek an asymmetric return profile through active risk management rather than try and beat an arbitrary benchmark. It is risk management experience and skill that help survive accidents and avoid negative compounding. And accidents do happen; financial crises have occurred every 10 to 15 years since the Middle-Ages. Risk management is the discipline that deals with these "known unknowns".

The twenty-year period from 1980 to 1999, according to Ineichen, as far as financial cycles go, was an outlier, as indeed the equity market compounding rate was unusually high then; UK equities, for example, returned an average of 12 to 14%.

"This was essentially an accident," he explained, "as much lower returns are the norm. During this investor-friendly period, it was not necessarily obvious that risk management was required for the long-term investor; long-only and buy-and-hold strategies......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: Global Sigma captures February's long-vol trade[more]

    Bailey McCann, Opalesque New York for New Managers: Florida-based Global Sigma rode February's volatility to new highs. The firm's AGSF strategy is up +2.8 percent through February 16 and +4.2 percent YTD a

  2. Art & Motion launches collectible car alternative investment vehicle[more]

    Komfie Manalo, Opalesque Asia: Luxembourg-based Art & Motion has launched a new investment vehicle dedicated to vintage cars and exceptional high-quality vehicles as this collectible market has grown exponentially the turn of the centu

  3. Investing - Hedge funds turn short on tech just as stock rally takes off, After biggest short, speculators slash bearish US bond bets as supply deluge looms[more]

    Hedge funds turn short on tech just as stock rally takes off From Newsmax.com: A key group of investors has just missed out on the biggest tech-stock rally since 2014. Hedge funds and other large speculators turned net short on Nasdaq 100 Index futures for the first time in 21 months, ac

  4. Low volatility funds fail to protect investors[more]

    From FT.com: A number of exchange traded funds (ETFs) designed to protect investors from sharp stock market gyrations lost more money than mainstream US stocks during a sell-off this month, underperforming in precisely the conditions in which they were meant to thrive. Low volatility ETFs, lau

  5. Legal - Hedge funds fight to save M&A arbitrage strategy, Fannie Mae and Freddie Mac ruling blow to hedge funds[more]

    Hedge funds fight to save M&A arbitrage strategy From FT.com: Hedge funds which use the US courts to wring higher prices for merger and acquisition deals are fighting to save the lucrative investment strategy, after a Delaware court ruling that threatens to shut it down. Verition Partner